Hugh MasonHugh MasonHugh MasonHugh Mason

Partner, Pembridge Partners LLPPartner, Pembridge Partners LLPPartner, Pembridge Partners LLPPartner, Pembridge Partners LLP

www.pembridge.netwww.pembridge.netwww.pembridge.netwww.pembridge.net

How Creative How Creative How Creative How Creative SMEsSMEsSMEsSMEs growgrowgrowgrowModelling and measuring the lifecycle of growing businessesModelling and measuring the lifecycle of growing businessesModelling and measuring the lifecycle of growing businessesModelling and measuring the lifecycle of growing businesses

Stockholm, 22 SEP 2008Stockholm, 22 SEP 2008Stockholm, 22 SEP 2008Stockholm, 22 SEP 2008

Coming UpComing UpComing UpComing Up

• Pembridge has worked with over 2,000 Creative SMEs in the UK, Singapore and Netherlands.

• A model for SME growth has emerged: SMEs seem to grow, or get stuck at, a series of distinct stages.

• It is possible to help SMEs that are genuinely motivated to grow to move through these stages quicker, and with greater confidence, than they could do on their own.

• It is possible to measure and predict the progress of SMEsobjectively and so to allocate economic development resources rationally, on the basis of evidence.

Introducing PembridgeIntroducing PembridgeIntroducing PembridgeIntroducing Pembridge

Founded 2001Founded 2001Founded 2001Founded 2001 to help owner-managers of creative businesses to build and release value in their businesses. We help someone become a millionaire every 4-8 weeks.

In total: five partnersIn total: five partnersIn total: five partnersIn total: five partners + eight staff + 20 regional associates. People who have ‘been there before’in Music, marketing services, TV, Film, Design …

€30m+ raised or invested30m+ raised or invested30m+ raised or invested30m+ raised or invested, 50 current engagements across Creative Industries

Active in Singapore, UK, NetherlandsActive in Singapore, UK, NetherlandsActive in Singapore, UK, NetherlandsActive in Singapore, UK, Netherlands2,000+ SMEs engaged

The Knowledge EconomyThe Knowledge EconomyThe Knowledge EconomyThe Knowledge Economy

ArtArtArtArtScienceScienceScienceScience

€

Products& Services

CultureResearch

Development

CreativeIndustry

The Knowledge EconomyThe Knowledge EconomyThe Knowledge EconomyThe Knowledge Economy

ArtArtArtArt

€

Aesthetic I.P.Technical I.P.

ItItItIt’’’’s all about Intellectual Propertys all about Intellectual Propertys all about Intellectual Propertys all about Intellectual Property

ScienceScienceScienceScience

One model of value chains in the sectorOne model of value chains in the sectorOne model of value chains in the sectorOne model of value chains in the sector

AgenciesBrandOwners

Non-mediaProducts /Services

ProducersDevelopers

PublishersBroadcastersAggregators

MediaProducts

Events FirmsMusicians

Performance

VenueOperators

TangibleExperiences

DesignersMakers

RetaliersDistributors

TangibleProducts

Consumers

Creative Services FirmsEg PR, Ad, DM, Design

Content Companies,Eg TV, Film, Games, Online, Print

Created Experiences,Eg Exhibition, Galleries, Poss Sports

‘Original’ productsEg Artisans, Fashion, Jewellery

Creative Creative Creative Creative SMEsSMEsSMEsSMEs say they want to grow say they want to grow say they want to grow say they want to grow …………

Similar issues across cultures and subSimilar issues across cultures and subSimilar issues across cultures and subSimilar issues across cultures and sub----sectorssectorssectorssectors

Most Most Most Most SMEsSMEsSMEsSMEs get stuck trying to growget stuck trying to growget stuck trying to growget stuck trying to grow

Unwilling to

answer

Don't know

£5m - £50m

£2m - £4.99m

£500,000 - £1.99m

£250,000 -

£499,999

£100,000 -

£249,999

£60,000 - £99,999

£30,000 - £59,999

£10,000 - £29,999

Less than

£10,000

turnbanding

100

80

60

40

20

0

Turnover BandTurnover BandTurnover BandTurnover Band

Number of

Number of

Number of

Number of SM

Es

SMEs

SMEs

SMEs

No - no

goal set£0 -

£500k£500K -

£1m£1m -

£5m£5m

plus

No timesca le

Less than 3y rs

3-4yrs t ime

4-5y rs time

5-6yrs t ime

0

5

10

15

20

25

30

35

No

. o

f F

irms

Why? Most Why? Most Why? Most Why? Most SMEsSMEsSMEsSMEs dondondondon’’’’t really t really t really t really wantwantwantwant to grow!to grow!to grow!to grow!

Inconvenient TruthInconvenient TruthInconvenient TruthInconvenient Truth:Most Creative Industries

SMEs do not seem to havecommercial growth goals.

Eg … in this survey ofNorth East UK film and TVfirms, >80% explicitly said

they have no commercial goal.

They are simply not onthe economic developmentagenda. They are motivated

by social-or cultural wealth building.

It all depends on what you mean by It all depends on what you mean by It all depends on what you mean by It all depends on what you mean by ‘‘‘‘growthgrowthgrowthgrowth’’’’

Doing great workDoing great workDoing great workDoing great workCultural WealthCultural WealthCultural WealthCultural WealthWork focus: Fine ArtistsWork focus: Fine ArtistsWork focus: Fine ArtistsWork focus: Fine Artists………… Art will happen anyway?Art will happen anyway?Art will happen anyway?Art will happen anyway?

Building a better worldBuilding a better worldBuilding a better worldBuilding a better worldSocial WealthSocial WealthSocial WealthSocial WealthWorkplace/World focus:Workplace/World focus:Workplace/World focus:Workplace/World focus:Social EnterpriseSocial EnterpriseSocial EnterpriseSocial Enterprise

Making moneyMaking moneyMaking moneyMaking moneyEconomic WealthEconomic WealthEconomic WealthEconomic WealthGrowth focusGrowth focusGrowth focusGrowth focusPerhaps 5% of firmsPerhaps 5% of firmsPerhaps 5% of firmsPerhaps 5% of firms

We must be clear about the real agenda!We must be clear about the real agenda!We must be clear about the real agenda!We must be clear about the real agenda!

Challenges for public sector agenciesChallenges for public sector agenciesChallenges for public sector agenciesChallenges for public sector agencies

• Is the priority cultural, social or economic?

• How to identify which SMEs are going to deliver hard economic outputs?

• How to use that insight to allocate company development resources fairly and effectively?

• How to accelerate SMEs with the strongest commercial potential to achieve fast, visible, concrete commercial success?

• How to provide cost-effective, positive individual feedback to weaker SMEs?

• How to create a decision audit trail and measure the impact objectively?

Maturity

High

Medium

Low

Micro Small Medium LargeSize

A model of SME growthA model of SME growthA model of SME growthA model of SME growth

Clubs

Level 2

Artisans

Level 1

Freelancers

/ pre-start-up

Level 0

Value Growers

Level 4

Value Creators

Level 3

Acquirers

Level 6

Value Realisors

Level 5

Public

Companies

Level 7

An evidenceAn evidenceAn evidenceAn evidence----based approach to manage growthbased approach to manage growthbased approach to manage growthbased approach to manage growth

Vital StatisticsVital StatisticsVital StatisticsVital Statistics

Rapid, sectorRapid, sectorRapid, sectorRapid, sector----specificspecificspecificspecificgrowthgrowthgrowthgrowthpotentialpotentialpotentialpotential

assessmentassessmentassessmentassessmentforforforfor

all all all all SMEsSMEsSMEsSMEs 25% are potential25% are potential25% are potential25% are potentialhigh growth:high growth:high growth:high growth:Blitz strategicBlitz strategicBlitz strategicBlitz strategic

Business PlanningBusiness PlanningBusiness PlanningBusiness Planningfor thesefor thesefor thesefor these

InvestmentInvestmentInvestmentInvestment(1% of firms)(1% of firms)(1% of firms)(1% of firms)

75% of firms need help75% of firms need help75% of firms need help75% of firms need helpwith basic issues.with basic issues.with basic issues.with basic issues.

ExistingExistingExistingExistingSupportSupportSupportSupport

orgs serviceorgs serviceorgs serviceorgs servicethem. Vital Statsthem. Vital Statsthem. Vital Statsthem. Vital Statsdata helps identifydata helps identifydata helps identifydata helps identifyspecific needsspecific needsspecific needsspecific needs

SMEsSMEsSMEsSMEs at different stages need different helpat different stages need different helpat different stages need different helpat different stages need different help

Market Awareness

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

<= 0

> 0 to

10 > 10 to 20

> 20 to 30

> 30 to 40

> 40 to 50

> 50 to 60

> 60 to 70

> 70 to 80

> 80 to 90

> 90 to 100

> 100

LowerQuartile

UpperQuartile

Some possible interventions to help Some possible interventions to help Some possible interventions to help Some possible interventions to help SMEsSMEsSMEsSMEs growgrowgrowgrow

• One-on-one mentoring

• Surgeries

• Phone-based mentoring

• Workshops

• Know-how sharing lunches

• Cluster group events0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

<= 0

> 0 to

10 > 10 to 20

> 20 to 30

> 30 to 40

> 40 to 50

> 50 to 60

> 60 to 70

> 70 to 80

> 80 to 90

> 90 to 100

> 100

LowerQuartile

UpperQuartile

VineyardVineyardVineyardVineyard ---- Inspiring Inspiring Inspiring Inspiring SMEsSMEsSMEsSMEs to try harderto try harderto try harderto try harder

Bonus Slides!Bonus Slides!Bonus Slides!Bonus Slides!

• How Vital Statistics Works

• Pembridge Public Sector partners worldwide

• Strategic planning for high-growth SMEs

• Detail on SME growth stages

• For more information, please contact:hugh.mason@pembridge.netwww.pembridge.net+44 8452 600 344

How How How How Vital StatisticsVital StatisticsVital StatisticsVital Statistics worksworksworksworks

20 minute20 minute20 minute20 minutecomputercomputercomputercomputer----assistedassistedassistedassistedphone phone phone phone

interviewinterviewinterviewinterview

SMESMESMESME’’’’sssslast 2last 2last 2last 2yearsyearsyearsyears’’’’

accountsaccountsaccountsaccounts

VS data centreVS data centreVS data centreVS data centre

ProfileProfileProfileProfileeeee----mailedmailedmailedmailedto SMEto SMEto SMEto SME

Profile /Profile /Profile /Profile /consultantconsultantconsultantconsultantbriefingbriefingbriefingbriefing

VS databaseVS databaseVS databaseVS database10,000+ 10,000+ 10,000+ 10,000+ SMEsSMEsSMEsSMEs

Creative SME

Pembridge Public Sector Partners worldwidePembridge Public Sector Partners worldwidePembridge Public Sector Partners worldwidePembridge Public Sector Partners worldwide

• Screen Yorkshire• NESTA• Media Training North West• North West Vision• Skillset• Northern Film and Media• Business Link for London• Skillset South East• Film London• Cheshire And Warrington

Creative Industries Network• DCMS• South West Screen• Digital Central

• Singapore Media Development Authority

• WestmARC• University of Utrecht• CIDA Huddersfield• Creative Lancashire• Birmingham City University• Artsmatrix• G2i• NSTAR Design and Creative

FundComing up:Coming up:Coming up:Coming up:• New Zealand Trade & Enterprise• SIPA, Thailand

Strategic planning for HighStrategic planning for HighStrategic planning for HighStrategic planning for High----Growth Growth Growth Growth SMEsSMEsSMEsSMEs

PERSONAL GOALS•Why are you doing what you do?•What’s your idea of success?•How much risk/certainty?

CURRENT POSITION•Where is the firm now?•What makes it special?•How is it selling itself?

FUTURE SCENARIOS•What credible futures might be possible?•What would the pros and cons of each be?•What would it take to make each one real?

SETTING THE FIRM’S GOAL•Which scenario offers the best match to the team’s personal goals?

VISUALISE THE PLAN•Create snapshots of the firm’s future projects, money and people for each quarter over the next 3-5 years.

MAKING IT REAL•Identify the partners and resources needed to make the plan real.•Commit to execution.

Level 0: Freelancers / preLevel 0: Freelancers / preLevel 0: Freelancers / preLevel 0: Freelancers / pre----startstartstartstart----upupupup

Clubs

Level 2

Artisans

Level 1

Freelancers

/ pre-start-up

Level 0

Value Growers

Level 4

Value Creators

Level 3

Acquirers

Level 6

Value

Realisors

Level 5

Public

Companies

Level 7

Level 0: Freelancers / preLevel 0: Freelancers / preLevel 0: Freelancers / preLevel 0: Freelancers / pre----startstartstartstart----upupupup

• Requirement for basic business skills development, technical and creative skills, but key also to inspire entrepreneurial attitude alongside skills.

• History shows it’s virtually impossible to spot winners at this stage but essential to do work here to feed the pipeline

• Danger of delivering numbers, not quality if you focus exclusively or too much on this group

• Mentoring can be appropriate here but doing it one-on-one is expensive. Group-based mentoring and peer-mentoring can be very effective. Cluster groups are an effective delivery channel

Level 1: ArtisansLevel 1: ArtisansLevel 1: ArtisansLevel 1: Artisans

Clubs

Level 2

Artisans

Level 1

Freelancers

/ pre-start-up

Level 0

Value Growers

Level 4

Value Creators

Level 3

Acquirers

Level 6

Value

Realisors

Level 5

Public

Companies

Level 7

Level 1: ArtisansLevel 1: ArtisansLevel 1: ArtisansLevel 1: Artisans

• 1-5 freelancers sharing space/resources

• It’s a happy bonus to be paid: the focus is on work, not money. No ‘equity value’ being built as no structure

• Participants have yet to make the real commitment to each other and employees to grow something larger than themselves. Hard to add value until they decide to commit.

• The same kind of mentoring and skills development as is appropriate at Level 0 can be appropriate here and, drawing on the medieval model of apprenticeship, Master Artistans may be very well placed to mentor those entering the profession at the next level below them through peer-to-peer mentoring.

Level 2: ClubsLevel 2: ClubsLevel 2: ClubsLevel 2: Clubs

Clubs

Level 2

Artisans

Level 1

Freelancers

/ pre-start-up

Level 0

Value Growers

Level 4

Value Creators

Level 3

Acquirers

Level 6

Value

Realisors

Level 5

Public

Companies

Level 7

Level 2: ClubsLevel 2: ClubsLevel 2: ClubsLevel 2: Clubs

• Distinguished by have employees, but stalled/low growth – lifestyle focus -a model that won’t scale

• Little / no process even if great work. Owners still work IN the business, not ON it

• These SMEs prevaricate about the future, worried about taking risks of growth, especially about losing their culture

• Can be inspired through role models, cluster groups, or an investment readiness program can help an SME bypass this stage altogether.

• The management team of an SME seeking to grow beyond this stage needs intensive mentoring to feel confident to take the significant risks involved in growing to become a business that builds value in the business that is bigger than the people who founded it.

Level 3: Value CreatorsLevel 3: Value CreatorsLevel 3: Value CreatorsLevel 3: Value Creators

Clubs

Level 2

Artisans

Level 1

Freelancers

/ pre-start-up

Level 0

Value Growers

Level 4

Value Creators

Level 3

Acquirers

Level 6

Value

Realisors

Level 5

Public

Companies

Level 7

Level 3: Value CreatorsLevel 3: Value CreatorsLevel 3: Value CreatorsLevel 3: Value Creators

• Have the ambition and prepared to take the actions required to grow

• Starting to understand Process and to use advisers appropriately. Make Decisions, eg Will Fire A Client

• Founders have made a crucial transition: they have decided to work ON the business, not IN it.

• Typically this is the stage at which SMEs first try to write a proper business plan, something they almost always need mentoring help to do as it’s so difficult to tell your own story in isolation.

• Many SMEs falter at this stage because the culture of the business and the role of the key individuals in it change so profoundly. Very rare for companies to make the transition from Club to Value Creator without mentoring.

Level 4: Value GrowersLevel 4: Value GrowersLevel 4: Value GrowersLevel 4: Value Growers

Clubs

Level 2

Artisans

Level 1

Freelancers

/ pre-start-up

Level 0

Value Growers

Level 4

Value Creators

Level 3

Acquirers

Level 6

Value

Realisors

Level 5

Public

Companies

Level 7

Level 4: Value GrowersLevel 4: Value GrowersLevel 4: Value GrowersLevel 4: Value Growers

• Management team knows the numbers

• Owners less hands-on with Clients

• Innovation Happens

• The cultural and personal/professional changes involved in becoming a value-creating business typically take a year or so to bed down, even with support from a mentor

• At first, new skills are needed for an SME to put in place systems (accounting, sales, HR, etc).

• Focus then shifts to growing value. Mentoring from an individual with the strategic vision to help the management team understand big picture is critical.

Level 5: Value Level 5: Value Level 5: Value Level 5: Value RealisorsRealisorsRealisorsRealisors

Clubs

Level 2

Artisans

Level 1

Freelancers

/ pre-start-up

Level 0

Value Growers

Level 4

Value Creators

Level 3

Acquirers

Level 6

Value

Realisors

Level 5

Public

Companies

Level 7

Level 5: Value Level 5: Value Level 5: Value Level 5: Value RealisorsRealisorsRealisorsRealisors

• Established Business Model

• Single Focus for management team – the end game

• Support requirement is for mentoring to understand a series of business issues that take them beyond the day to day issues of trading and running a business into areas such as corporate finance, mergers and acquisition, or fund-raising.

• External legal advice and wealth management mentoring becomes relevant too.

• Further down the management structure there is need to put in place skills auditing, training programmes, formalised job skills descriptions etc.

Level 6: AcquirersLevel 6: AcquirersLevel 6: AcquirersLevel 6: Acquirers

Clubs

Level 2

Artisans

Level 1

Freelancers

/ pre-start-up

Level 0

Value Growers

Level 4

Value Creators

Level 3

Acquirers

Level 6

Value

Realisors

Level 5

Public

Companies

Level 7

Level 6: AcquirersLevel 6: AcquirersLevel 6: AcquirersLevel 6: Acquirers

• Mature firms confident about their sustainability

• Board concerned with big picture strategy, not tactics

• Major employers, rocks in the economy, trainers for industry (whether they like losing employees to competitors or not!)

• In such a business, typically the people at the heart of the business must themselves become mentors, guiding the management teams of the companies they acquire. Learning mentoring skills is a new requirement for CPD at the top level

Level 7: Public CompaniesLevel 7: Public CompaniesLevel 7: Public CompaniesLevel 7: Public Companies

Clubs

Level 2

Artisans

Level 1

Freelancers

/ pre-start-up

Level 0

Value Growers

Level 4

Value Creators

Level 3

Acquirers

Level 6

Value

Realisors

Level 5

Public

Companies

Level 7

Level 7: Public CompaniesLevel 7: Public CompaniesLevel 7: Public CompaniesLevel 7: Public Companies

• Major skills development factories for industry through formalised skills development structures, links with Higher Education etc

• Businesses at this level have the resources (and the need) to take a strategic interest in Skills Development and have fully-resourced HR departments

• The management teams of public companies typically employ mentors at many levels to coach their staff.

• At the most senior level, management consultants and/or non-executive directors may provide executive mentoring.